George Osborne has agreed to water down plans to tax pasties and caravans
following a widespread public backlash.

Pasties and other bakery items will no longer attract Vat if they are “cooling down” after being removed from the oven.

The Chancellor controversially proposed in the budget that any food served above ambient temperature would be taxed at 20 percent to address an “anomaly” in the system.

However, the proposal sparked protests from bakeries and others who claimed it was an unfair tax on millions of working-class Britons who enjoyed pasties and pies for lunch. A tabloid newspaper hired an actress dressed as Marie Antoinette to follow Mr Osborne in an attempt to demand a rethink.

Mr Osborne wrote to Andrew Tyrie, the chairman of the Treasury select committee, to confirm the climbdown.

He also said that plans to tax static caravans at 20 percent will be altered. They will now attract Vat at a reduced rate of five percent from next April. Static caravans do not currently attract any Vat.

The climbdown appears well-timed coming just before the extended Jubilee bank holiday when tens of thousands of Britons are expected to head to the west country for summer breaks. It comes as David Cameron and Mr Osborne are facing increasing accusations that they are “out of touch” with ordinary people.
Is the pasty tax U-turn an embarrassment?

The row over the tax led to David Cameron claiming that he “loved a hot pasty” and saying that he had recently enjoyed the hot snack at Leeds railway station. However, it later emerged that the pasty shop he claimed to have used had closed down several years ago.

Mr Osborne attracted ridicule after he claimed that he “couldn’t remember the last time” he ate a pasty from Greggs, the bakery chain which was a vocal critic of the plans, which would have raised £100 million in extra tax.

George Eustice, a Conservative Cornish MP, who has led the campaign to change the proposed tax increase on pasties, welcomed the move.

He said: “This is a very good outcome which will mean that most pasties and sausage rolls won’t be taxed. That is exactly what the industry had requested.”

Under the revised proposals, only food which is heated after being taken out of the oven – or sold in bags or containers designed to keep the products hot – will be taxed. Supermarkets selling rotisserie chickens, another target of the tax rise, will still pay the higher taxes, as ministers have targeted the climbdown to benefit smaller shops and bakeries.

The changes to the Vat rules were originally proposed because officials said that the current system – whereby takeaway food like fish and chips is taxed but pasties are not – was unfair. However, the scale of opposition to the plan took the Treasury by surprise.

Ministers are also thought to be preparing to water down other controversial measures unveiled in the budget, including plans to limit the amount of tax relief that wealthy people can reclaim on charitable donations.

A source quote to Mr Osborne said: "We said at the budget we would consult on how exactly to close the anomaly and have done so. We have listened and are glad to have found a fair solution."

Liberal Democrat MP Stephen Gilbert welcomed the pasty tax move after tabling an early day motion and raising the issue at Prime Minister's Questions.

He said: "The Cornish people have won and there will be dancing in streets from Land's End to the Tamar as people hear that the Government has dropped their plans to clobber local people and local businesses with this tax.

"The strength of feeling from local people and the national baking industry has been clear since these proposals were announced.

"Plans to extend VAT to batch-baked goods would have been unfair, unenforceable and would have cost jobs and investment across the country.

"Since the Budget, I have worked with the industry to find an alternative and I'm delighted that the Government has listened and agreed.

"This alternative, that I proposed in meetings with the minister and through parliamentary debates, is a workable solution that creates a level playing field with other sorts of hot food and won't endanger jobs, investment or growth."